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An equilibrium analysis of the revenuemaximizing multinational enterprise

Author

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  • HU Songhua

    (Lingnan College, Sun Yat-sen University, Guangzhou 510275, China)

Abstract

Departing from the traditional profit-maximization assumption underlying the theory of the multinational enterprises (MNEs), this paper proposes a model of the revenue-maximizing MNE subject to the profit constraint. The nonlinear programming techniques are used for the equilibrium analysis of the MNE¡¯s decision-making. A set of optimal conditions is derived regarding the quantity of output, volume of intra-firm trade, allocation of multinational production, as well as transfer prices in both exogenous and endogenous cases. Under the context, a comparison of the behavioral differences is made between the revenue-maximizing MNE and the profit-maximizing MNE.

Suggested Citation

  • HU Songhua, 2008. "An equilibrium analysis of the revenuemaximizing multinational enterprise," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(3), pages 482-495, September.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:3:p:482-495
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0023-7
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    More about this item

    Keywords

    multinational enterprise; revenue maximization; behavioral model; constrained sales-maximization;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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